NBS: Lower GDP growth still spurs new employment

DESPITE the much lower pace of GDP growth compared to the times before the crisis, employment is growing, analysts with Slovakia’s central bank, the NBS, wrote in their latest commentary published on July 22.

The commentary explored the relationship between the employment rate and the actual economic developments in Slovakia.

“We’ve found that this relationship is largely changing over time,” the TASR newswire quoted the document. “The flexibility in the employment rate vis-a-vis the actual economic activity increased during the crisis in 2008-09, and estimates regarding the turnaround point, the pace of economic growth at which the economy adds new jobs, dropped from close to 3 percent to anywhere between 1.2 and 1.8 percent.”

This change may be explained by a long-term shift in the core of the economy from industrial sectors to services, analysts added. This structural shift makes the employment rate more responsive to GDP growth, particularly so if the economic growth is fuelled by domestic demand – as opposed to a situation when it is propelled by foreign demand.

As per figures released in June, Slovakia’s GDP rose by 3.1 percent year-on-year in 1Q15. According to Finance Ministry projections, the year-round GDP growth in 2015 should be 3.2 percent.